The economic outlook for the euro area has deteriorated rapidly. The impact of Brexit on Europe as a whole is hard to predict. Another factor overshadowing the global economy is the trade dispute between the USA and China.

The summary provides a simple introduction to the assessment of developments in the global economy and monetary policy presented in the March edition of the Bank of Finland Bulletin.

A review of the ECB’s monetary policy strategy is due in light of the latest economic research and the changed operating environment.

In times of uncertainty, prudence is justified in the normalisation of monetary policy.

The favourable outlook for the global economy is overshadowed by the threat of protectionism. In the euro area growth has picked up. Some of this acceleration is on a sustainable basis, but long-term growth is likely to remain slower than pre-crisis growth.

The Bank of Finland forecasts that Finland’s GDP will grow 3.1% in 2017, 2.5% in 2018 and 1.5% per annum in 2019–2020. Growth will be broadly based and amplified by exports. A more positive current account will lay a foundation for sustainable growth.

Global growth will strengthen relative to 2016 and proceed at a pace of over 3% in 2017–2019. Chinese growth will decelerate in an orderly manner, moderating the pace of global growth.

The euro area economy has now benefited from four years of unbroken growth, and this is expected to continue. The evolution of the global economy will be affected by the economic policy of the new US administration. A potential increase in protectionist actions may impair the expansion of the global economy and trade.